(FYI – Since I will be out of town for a few days and my internet connection will be sporadic at best, I asked No Credit Needed to write up a guest post. Thanks NCN!)
I want to thank “My Two Dollars” for the chance to post an article as a “Guest Author”. I love the tag-line at the top of this blog “…for the rest of us”.
If you are unfamiliar with my particular story, I started a blog (called No Credit Needed) to track my progress as I got out of debt. I paid off over $11,500 from April of 2005 to February 2006. From February 2006 to October 2006, I was able to save $20,000 in an emergency fund. Do the math you will see that it took me about TEN months to pay my debt, but only EIGHT months to save up for my emergency fund.
Why was it easier for me to save money than to pay off debt? I’ve thought about this for some time and here are five reasons:
1. After 10 months, I had learned how to efficiently budget and manage my money. During the first few months of paying off debt, I was still struggling with old “habits”. But, after almost a year of managing my money, I was getting more and more focused on controlling spending and cutting cost.
2. When I was paying off debt, the interest rates were working AGAINST me. When I was saving money, the interest rates were working FOR me.
3. As I was focusing on my finances and my financial behavior, I began to seek new sources of income. I made extra money from eBay, yard sales, and my web sites. Instead of spending this extra money onfrivolous things, I poured every extra dollar into my debt reduction and, eventually, my savings. It makes sense that I got better, over a period of time, at finding extra sources of income. By the time I got out of debt, I was bringing home an additional $500 to $600 a month in additional income.
4. Psychology plays a factor. It is SO hard to describe the feeling of being debt free. I will tell you, however, that once I paid off that last debt, I felt better than I had in years and years. I was (and am) determined to STAY debt free. I believe that I focused such intensity on building up my emergency fund because I did not want to risk having to borrow any money.
5. Knowledge is a powerful thing. As I was getting out of debt, I found myself gathering more and more information about personal finance. So, once I got out of debt, I was not confused about what to do with my money or how to manage my money. During each step along my journey, I am preparing for, and learning about, the next step.
I’d like to thank My Two Dollars for the opportunity to be a “Guest Author”. You can find out more about me and my sites over at No Credit Needed.